The Dire Reality of 340B Hospitals at War with Big Pharma

The 340B Drug Pricing Program was designed to help safety-net healthcare providers address the needs of vulnerable and underserved patients by stretching scarce federal resources as far as possible. Over the past year, the pandemic has continued posing challenges to the 340B program as manufacturers’ attempts to diminish drug discounts have come at a cost to safety-net providers and patient populations.

340B Impacts Communities and Patient Care

Essentially every health system continues facing economic pressure and cash flow issues related to COVID that make cost savings critical.  The cash flow generated by the 340B program is a significant source of revenue for covered entities. Without the revenue generated by 340B, many of these organizations would be unable to continue providing necessary services and care to their communities. Adding to those stressors is big pharma and the changing stance the pharmaceutical industry added to the program.

Drugmaker Restrictions on 340B Discounts

The 340B law requires drug companies to discount their eligible outpatient drugs to safety-net providers. However, in July 2020, six pharmaceutical companies began violating this law by denying 340B-discounted drugs to contract pharmacies or limiting sales unless the covered entity provides extensive patient data to alleviate any concern over duplicate discounts.

As part of the 340B program, pharmaceutical companies agree to provide drug discounts to safety-net providers in exchange for Medicare or Medicaid participation. Duplicate discounts happen when a manufacturer offers both 340B and Medicaid discounts on the same drug. Although a policy is in place to keep this from happening, preventing it has grown more complicated in recent years due to recordkeeping and infrastructure issues.

Working to Restore Trust

According to HHS estimates, the actions of these companies have caused hospitals and clinics to lose $3.2 billion in savings over the last year. Despite attempts from drug manufacturers to undermine program savings, there has been strong support for the 340B program among legislators, administration officials, and other policymakers in 2021.

Recently, federal action was taken to get drug companies to reestablish 340B pricing for prescription drugs dispensed by community pharmacies to patients of 340B-covered entities. In September 2021, the HRSA sent letters to the same six drug manufacturers from May, notifying that HRSA is pursuing legal action towards ending the manufactures’ 340B drug pricing rejections. The HRSA referred the uncooperative drug companies to the Office of Inspector General (OIG), asking to impose financial penalties on the drugmakers for denying 340B discounts to safety-net providers.

As of today, eight manufacturers are restricting the 340B discount at contract pharmacies. Most recently, Boehringer Ingelheim and Merck have also joined in limiting 340B access at contract pharmacies. However, it is important to note that this issue pertains to hospitals that do not have their own pharmacies and rely on contract pharmacy relationships. This means covered entities with a hospital-owned pharmacy can still access 340B pricing for these manufacturers.

Looking Ahead

The 340B program is vital for safety-net hospitals providing valuable care to low-income patients. Under the current rulings as they stand now, hospitals serving the highest number of low-income patients face the deepest cuts. Without adequate funding from 340B, hospitals may be forced to cut critical services, including cancer care and other infusion services, utilization management efforts, medication adherence, diabetes care, mental health and substance abuse care, and pulmonary services.

To learn more about the challenges facing hospitals and how to lower costs and optimize care, download our free ebook, Pharmacy Benefit Strategies for Hospitals & Health Systems.

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